Herz: Financial Reporting Triumphs and Challenges
Were there warning signs of the worldwide financial crisis and global recession?
Could the addiction to off-balance sheet accounting have been stopped?
How could contentious reporting issues have been better resolved?
From the reporting scandals of 2001 and 2002 to the recent global financial crisis and efforts at international convergence of accounting standards, former Financial Accounting Standards Board Chairman Robert Herz discusses critical issues and much more in his new book, Accounting Changes: Chronicles of Convergence, Crisis, and Complexity in Financial Reporting. Herz tells the story from the perspective of his front row seat on many of the major developments affecting accounting and financial reporting during his tenure.
Herz has had a long and distinguished career--as Chairman of FASB, a former senior partner at PricewaterhouseCoopers, a part-time member of the International Accounting Standards Board, an author and someone who has seen the accounting and financial reporting profession develop and grow over the past several decades. In his book, Herz shares his experiences and insight, including the importance of charting and setting a course to improve standard setting when he joined the FASB, making things simpler by rationalizing the structure of the U.S. accounting standard setting, and reorganizing and codifying U.S. GAAP.
AICPA Insights interviewed Herz on financial reporting’s evolution and his role in it.
What would be your key message for those in the accounting and financial reporting profession?
I have been blessed to have been able to work in a great profession with wonderful colleagues. What we do is critical to the capital markets and the economy. My experience in the profession and as a standard setter have convinced me of the absolute truth of the axiom “what you measure matters.” It affects behavior, actions, and outcomes. Therefore, it is critical that we try to properly measure and report on those things that matter, in financial reporting and beyond.
What challenges and opportunities lie ahead for the profession?
Collectively we have been through a lot of change already, and the prospect of further significant change in accounting standards, disclosure requirements and modes of delivery of financial and corporate information is not, understandably, a thrilling prospect. But as Benjamin Franklin said, “When you’re finished changing, you’re finished.” There is important work underway to improve and converge financial reporting standards and chart a course forward in a world that becomes more interconnected every day. That work needs to continue and the profession needs to support it and embrace the changes as necessary steps to secure our future—and there’s a whole new realm of really intriguing opportunities in areas like sustainability and integrated reporting.
Why did you write the book?
Since leaving the FASB, many people encouraged me to write a book. Indeed, my many roles at C&L and PwC, in the profession, and as a standard setter provided me with a truly unique perspective on many of the major issues, developments, and changes in financial reporting over the past thirty years. Moreover, my time as Chairman of the FASB was an exciting, challenging and personally very satisfying part of my career and my life and, more importantly, a period of significant change and opportunity for financial reporting, both in the U.S. and internationally. So I felt I could provide a relevant and interesting chronicle of some of the major events, developments and forces in the world of accounting and financial reporting along with my perspectives on these matters.
Herz will be signing copies of his book at the AICPA’s 2013 Practitioners Symposium and Tech+ Conference, June 10 in Las Vegas.
Arleen Thomas, CPA, CGMA, Senior Vice President - Management Accounting, American Institute of CPAs.